The 24-year-old has signed a four-year contract with the Black Cats to go back to the Stadium of Light after scoring 10 goals for the club when he spent the 2013-14 season on loan from Liverpool.
"I am delighted to be back at Sunderland. It is a club I know really well from my time here previously," Borini told the club's website.
"It will be emotional for me to play at the Stadium of Light again and I can't wait to get back on the pitch as a Sunderland player."
Sunderland coach Dick Advocaat added: "Fabio is a great addition to the squad who will make our front line stronger.
"He can play in a number of attacking positions which is a huge benefit to the team."
Borini, who has played once for Italy, began his career with Bologna before moving to Chelsea, where he made a handful of first-team appearances. He has also played on loan at Swansea City.
Despite being manager Brendan Rodgers's first signing at Liverpool, he never established himself and made just 12 league appearances last season, nine as a substitute.
